Central banks hungry for gold buy enough for 75 Dreamliners

13 Feb7:55 AM

[LONDON] Central banks purchased enough gold in 2014 to buy 75 Boeing Co. Dreamliners.

Governments added 477.2 metric tons to their reserves, the second-biggest increase in 50 years and 17 per cent more than a year earlier, the World Gold Council said in a report Thursday.

Based on the average price of gold in 2014, central banks probably paid about US$19.4 billion. A Boeing 787-9 has a US$257.1 million retail price, according to the company's website.

Central banks have added to gold reserves for the past five years, a reversal from two decades of selling since the late 1980s.

Purchases will be at least 400 tons this year, according to estimates from the London-based council, which represents 17 gold producers. Total demand for gold fell last year as Chinese consumers bought less jewelry, bars and coins.

"There is a lot of scope for emerging market central banks to expand their holdings as these are still significantly underweight," Alistair Hewitt, head of market intelligence at the council, in a phone interview on Wednesday. "Demand from this sector is going to remain robust."

Russia was the biggest buyer of gold, while Ukraine sold the most as fighters from both countries clashed along Ukraine's eastern border.

RUSSIA'S HOARD

Russia's gold stockpile has grown to the biggest since at least 1993 after purchases topped 173 tons last year.

The country has been buying the metal to diversify its foreign reserves and solve problems related to ruble liquidity, central bank Governor Elvira Nabiullina said in an interview with Bloomberg Television in Moscow this month.

Gold accounts for about 12 per cent of its total foreign reserves. That's still less than the US and Germany, the biggest holders, with the metal making up about 70 per cent of reserves.

Ukraine sold almost 19 tons of gold, while Kazakhstan and Iraq both bought about 48 tons, according to the council. Azerbaijan purchased about 10 tons, the report showed.

Gold for immediate delivery added 0.3 per cent to US$1,222.99 an ounce as of 12.16pm in London. The metal has climbed 3.3 per cent this year.

Countries have bought 1,964 tons of gold over the past five years, equal to more than seven months of mine output, as they sought an alternative to currencies, according to the gold council report.

BLOOMBERG

Thursday, February 12, 2015